ORAMED PHARMACEUTICALS INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the audited consolidated financial
statements and the related notes included elsewhere herein and in our audited
consolidated financial statements.



In addition to our audited consolidated financial statements, the following
discussion contains forward-looking statements that reflect our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in
the forward-looking statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this Annual Report on
Form 10-K, particularly in "Cautionary Statement Regarding Forward-Looking
Statements" and "Item 1A. Risk Factors."



Overview of Operations

We are currently a pharmaceutical company engaged in the research and
development of innovative pharmaceutical solutions with a technology platform
that allows for the oral delivery of therapeutic proteins.

Through our research and development efforts, we have developed an oral dosage
form intended to withstand the harsh environment of the stomach and effectively
deliver active biological insulin or other proteins. The excipients in the
formulation are not intended to modify the proteins chemically or biologically,
and the dosage form is designed to be safe to ingest. We plan to continue to
conduct clinical trials to show the effectiveness of our technology.



On January 11, 2023, we announced that the ORA-D-013-1 Phase 3 trial did not
meet its primary and secondary endpoints. As a result, we have initiated a
comprehensive analysis of the data to understand if there is a path forward for
our oral insulin candidate. Concurrently, we are examining our existing pipeline
and have commenced an evaluation process of potential strategic opportunities,
with the goal of enhancing value for our stockholders.



Impact of COVID-19



We do not expect any material impact on our development timeline and our
liquidity due to COVID-19. However, we experienced approximately six months of
delays in clinical trials due to slow-downs of recruitment for trials generally.
On the other hand, Oravax continues to develop its oral vaccine, the demand for
which may be reduced if COVID-19 continues to abate. We continue to assess the
effect on our operations by monitoring the status of COVID-19.



                                       27





Results of Operations

The table and discussion that follows includes a comparison of our results of
operations and liquidity and capital resources for the year ended December 31,
2022 and the year ended December 31, 2021 and the four month periods ended
December 31, 2021 and 2020. For a comparison of our results of operations and
financial condition for the fiscal years ended August 31, 2021 and 2020, see
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" included in our Annual Report on Form 10-K for the fiscal year
ended August 31, 2021, filed with the SEC on November 24, 2021. For information
regarding the change in the Company's fiscal year from the period beginning on
September 1 and ending on August 31 to the period beginning on January 1 and
ending on December 31, see note 1 to our audited consolidated financial
statements.



                                                                      Four months       Four months
                                            Year ended                   ended             ended          Year ended
                                           December 31,              December 31,      December 31,       August 31,
                                       2022             2021             2021              2020              2021
                                                    (Unaudited)                        (Unaudited)
                                             (dollar amounts in thousands, except share and per share data)
Revenues                           $      2,703     $      2,703     $         904     $         904     $      2,703
Cost of revenues                              -                -                 -                 -                -
Research and development
expenses                                 27,639           23,203             9,037             6,889           20,989

Sales and marketing expenses              1,851              898               898                 -                -
General and administrative
expenses                                 13,811            7,591             3,295             1,576            5,937
Financial income (expense), net           2,934            1,068                71               237            1,234
Loss before taxes on income              37,664           27,921           

12,255             7,324           22,989
Taxes on income                             100                -                 -                 -                -
Net loss for the period            $     37,764     $     27,921     $      12,255     $       7,324     $     22,989

Net loss attributable to
Company's stockholders                   36,561           26,583            11,668             7,324           22,238
Net loss attributable to
non-controlling interest                  1,203            1,338               587                 -              751
Net loss for the period            $     37,764     $     27,921     $      12,255     $       7,324     $     22,989
Basic and diluted loss per share
of common stock                    $       0.94     $       0.81     $        0.31     $        0.30     $       0.78
Weighted average shares of
common stock outstanding used in
computing basic and diluted loss
per share of common stock            38,997,649       32,641,288        37,113,137        24,394,010       28,469,068




Revenues

Revenues consist of proceeds related to the HTIT License Agreement that are
recognized on a cumulative basis when it is probable that a significant reversal
in the amount of cumulative revenue recognized will not occur, through the
expected product submission date by HTIT of June 2023, using the input method.

Revenues for the years ended December 31, 2022 and 2021 were both $2,703.

Revenues for the four month periods ended December 31, 2021 and 2020 were both
$904.

Cost of Revenues



Cost of revenues consists of royalties related to the HTIT License Agreement
that will be paid over the term of the HTIT License Agreement in accordance with
revenue recognition accounting and the Law for the Encouragement of Industrial
Research, Development and Technological Innovation, 1984, as amended, including
any regulations or tracks promulgated thereunder, or the R&D Law.

There was no cost of revenues for the years ended December 31, 2022 and 2021 and
the four month periods ended December 31, 2021 and 2020.

Research and Development Expenses

Research and development expenses include costs directly attributable to the
conduct of research and development programs, including the cost of salaries,
employee benefits, costs of materials, supplies, the cost of services provided
by outside contractors, including services related to our clinical trials,
clinical trial expenses, the full cost of manufacturing drugs for use in
research and preclinical development. All costs associated with research and
development are expensed as incurred.



Clinical trial costs are a significant component of research and development
expenses and include costs associated with third-party contractors. We outsource
a substantial portion of our clinical trial activities, utilizing external
entities such as CROs, independent clinical investigators and other third-party
service providers to assist us with the execution of our clinical trials.



                                       28





Clinical activities which relate principally to clinical sites and other
administrative functions to manage our clinical trials are performed primarily
by CROs. CROs typically perform most of the start-up activities for our trials,
including document preparation, site identification, screening and preparation,
pre-study visits, training and program management.



Clinical trial and pre-clinical trial expenses include regulatory and scientific
consultants' compensation and fees, research expenses, purchase of materials,
cost of manufacturing of the oral insulin and exenatide capsules, payments for
patient recruitment and treatment, as well as salaries and related expenses of
research and development staff.



Research and development expenses for the year ended December 31, 2022 increased
by 19% to $27,639,000, compared to $23,203,000 for the year ended December 31,
2021. The increase was mainly due to an increase in expenses related to our
Phase 3 clinical trials and to stock-based compensation expenses. Stock-based
compensation expenses for the year ended December 31, 2022, were $3,176,000,
compared to $1,598,000 for the year ended December 31, 2021. The increase was
mainly due to new grants in 2022.



Research and development expenses for the four month period ended December 31,
2021 increased by 31% to $9,037,000, compared to $6,889,000 for the four month
period ended December 31, 2020. The increase was mainly due to an increase in
expenses related to our Phase 3 and NASH clinical trials in addition to expenses
related to in process research and development costs related to Oravax.
Stock-based compensation expenses for the four month period ended December 31,
2021, were $649,000, compared to $171,000 for the four month period ended
December 31, 2020. The increase was mainly due to equity awards granted to a
consultant and to new grants awarded in 2021.



Following the results of the ORA-D-013-1 Phase 3 trial, which did not meet its
primary and secondary endpoints, we terminated both ORA-D-013-1 and ORA-D-013-2
Phase 3 clinical trials. In parallel, we have initiated a comprehensive analysis
of the data to understand if there is a path forward for our oral insulin
candidate. We are examining our existing pipeline and have commenced an
evaluation process of potential strategic opportunities, with the goal of
enhancing value for our stockholders.



Government Grants



The Government of Israel encourages research and development projects through
the IIA, pursuant to the R&D Law. Under the R&D Law, a research and development
plan that meets specified criteria is generally eligible for a grant of up to
50% of certain approved research and development expenditures. Each plan must be
approved by the IIA.

From August 2009 to March 2014, our subsidiary Oramed Ltd. was awarded five
government grants amounting to a total net amount of NIS 8 million
(approximately $2,194,000 during such period) from the IIA. We used these funds
to support further research and development and clinical trials of our oral
insulin capsule and oral GLP-1 analog candidate during the period from February
2009 to December 2014. The five grants are subject to repayment according to the
terms determined by the IIA and applicable law.



In the years ended December 31, 2022 and 2021, the four month periods ended
December 31, 2021 and 2020 and the year ended August 31, 2021, we did not
recognize any research and development grants. As of December 31, 2022, we had
incurred liabilities to pay royalties to the Israel Innovation Authority of the
Israeli Ministry of Economy and Industry of $133,000.



Under the terms of the grants we received from the IIA, we are obligated to pay
royalties of 3% on all revenues derived from the sale of the products developed
pursuant to the funded plans, including revenues from licensed ancillary
services. Royalties are generally payable up to a maximum amount equaling 100%
of the grants received (dollar linked) with the addition of interest at an
annual rate based on the LIBOR rate.



The R&D Law generally requires that a product developed under a program be
manufactured in Israel. However, when applying for a grant, the applicant may
declare that part of the manufacturing will be performed outside of Israel or by
non-Israeli residents and if the IIA is convinced that performing some of the
manufacturing abroad is essential for the execution of the program, it may still
approve the grant. This declaration will be a significant factor in the
determination of the IIA as to whether to approve a program and the amount and
other terms of the benefits to be granted. If a company wants to increase the
volume of manufacturing outside of Israel after the grant has been approved, it
may transfer up to 10% of the company's approved Israeli manufacturing volume,
measured on an aggregate basis, outside of Israel after first notifying the IIA
thereof (provided that the IIA does not object to such transfer within 30 days).
In addition, upon the approval of the IIA, a portion greater than 10% of the
manufacturing volume may be performed outside of Israel. In any case of transfer
of manufacturing out of Israel, the grant recipient is required to pay royalties
at an increased rate, which may be substantial, and the aggregate repayment
amount is increased up to 120%, 150% or 300% of the grant, depending on the
portion of the total manufacturing volume that is performed outside of Israel.
The approval we received from the IIA for the License Agreement was subject to
payment of increased royalties and an increased ceiling, all in accordance with
the provisions of the R&D Law. The R&D Law further permits the IIA, among other
things, to approve the transfer of manufacturing rights outside of Israel in
exchange for the import of different manufacturing into Israel as a substitute,
in lieu of the increased royalties.



The R&D Law also provides that know-how developed under an approved research and
development program may not be transferred or licensed to third parties in
Israel without the approval of the research committee. Such approval is not
required for the sale or export of any products resulting from such research or
development. The R&D Law further provides that the know-how developed under an
approved research and development program may not be transferred or licensed to
any third parties outside Israel absent IIA approval which may be granted in
certain circumstances as follows: (a) the grant recipient pays to the IIA a
portion of the sale or license price paid in consideration for the purchase or
license of such IIA-funded know-how or the price paid in consideration for the
sale of the grant recipient itself, as the case may be, in accordance with
certain formulas included in the R&D Law; (b) the grant recipient receives
know-how from a third party in exchange for its IIA-funded know-how; or (c) such
transfer of IIA-funded know-how is made in the context of IIA approved research
and development cooperation projects or consortia.



                                       29

The R&D Law imposes reporting requirements with respect to certain changes in
the ownership of a grant recipient. The R&D Law requires the grant recipient to
notify the IIA of any change in control of the recipient or a change in the
holdings of the means of control of the recipient that results in a non-Israeli
entity becoming an interested party in the recipient, and requires the new
non-Israeli interested party to undertake to the IIA to comply with the R&D Law.
In addition, the rules of the IIA may require the provision of additional
information or representations in respect of certain such events. For this
purpose, "control" is defined as the ability to direct the activities of a
company other than any ability arising solely from serving as an officer or
director of the company. A person is presumed to have control if such person
holds 50% or more of the means of control of a company. "Means of control"
refers to voting rights or the right to appoint directors or the chief executive
officer. An "interested party" of a company includes a holder of 5% or more of
its outstanding share capital or voting rights, its chief executive officer and
directors, someone who has the right to appoint its chief executive officer or
at least one director, and a company with respect to which any of the foregoing
interested parties holds 25% or more of the outstanding share capital or voting
rights or has the right to appoint 25% or more of the directors.



Failure to meet the R&D Law's requirements may subject us to mandatory repayment
of grants received by us (together with interest and penalties), as well as
expose us to criminal proceedings. In addition, the Israeli government may from
time to time audit sales of products which it claims incorporate technology
funded through IIA programs which may lead to additional royalties being payable
on additional products.



Sales and Marketing Expenses

Sales and marketing expenses include the salaries and related expenses of our
commercial functions, consulting costs and other general costs.

Sales and marketing expenses for the year ended December 31, 2022 increased by
106% to $1,851,000, compared to $898,000 for the year ended December 31, 2021.
The increase was mainly due to stock-based compensation expenses, salary related
expenses and consulting expenses, mainly resulting from hiring our Chief
Commercial Officer. Stock-based compensation expenses for the year ended
December 31, 2022 were $1,172,000, compared to $579,000 for the year ended
December 31, 2021. The increase was mainly due to equity awards granted to

an
employee during 2022.



Sales and marketing expenses for the four month period ended December 31, 2021
were $898,000, compared to no expenses for the four month period ended December
31, 2020. The increase was mainly due to stock-based compensation expenses,
salary related expenses and consulting expenses. Stock-based compensation costs
for the four month period ended December 31, 2021 were $579,000, compared to no
stock-based compensation expenses during the four month period ended December
31, 2020. The increase was mainly due to equity awards granted to an employee
during 2021.

General and Administrative Expenses

General and administrative expenses include the salaries and related expenses of
our management, consulting costs, legal and professional fees, travel expenses,
business development costs, insurance expenses and other general costs.



General and administrative expenses for the year ended December 31, 2022
increased by 82% to $13,811,000, compared to $7,591,000 for the year ended
December 31, 2021. The increase was mainly due to higher stock-based
compensation costs, an increase in legal expenses and higher salary expenses due
to the recruitment of new employees in the year ended December 31, 2022,
partially offset by lower bonuses in the year ended December 31, 2022.
Stock-based compensation expenses for the year ended December 31, 2022 were
$7,160,000, compared to $2,368,000 for the year ended December 31, 2021. The
increase was mainly due to equity awards granted to employees during 2022.



General and administrative expenses for the four month period ended December 31,
2021 increased by 109% to $3,295,000, compared to $1,576,000 for the four month
period ended December 31, 2020. The increase was mainly due to an increase in
stock-based compensation expenses and professional fees as well as public
relations and investor relations expenses. Stock-based compensation costs for
the four month period ended December 31, 2021 were $1,034,000, compared to
$242,000 during the four month period ended December 31, 2020. The increase was
mainly due to equity awards granted to employees during the four month period
ended December 31, 2021 and to new award grants during 2021.



                                       30

Financial Income (Expense), Net

Net financial income was $2,934,000 for the year ended December 31, 2022,
compared to net financial income of $1,068,000 for the year ended December 31,
2021. The increase is mainly due to interest from short and long-term bank
deposits, partially offset by loss from revaluation of the shares we hold in
Entera and DNA.



Net financial income was $71,000 for the four month period ended December 31,
2021, compared to $237,000 for the four month period ended December 31, 2020.
The decrease is mainly due to a decrease in fair value of the ordinary shares of
Entera.

Basic and Diluted Loss Per Share of Common Stock

Basic and diluted loss per share of common stock for the year ended December 31,
2022 increased by 16% to $0.94, compared to $0.81 for the year ended December
31, 2021. The increase in loss was mainly due to the higher net loss in the year
ended December 31, 2022 compared to the year ended December 31, 2021.



Basic and diluted loss per share of common stock for the four month period ended
December 31, 2021 increased by 3% to $0.31, compared to $0.30 for the four month
period ended December 31, 2020. The increase in loss per share was due to a
higher net loss and a higher number of weighted average shares of common stock
in the four month period ended December 31, 2021 compared to the four month
period ended December 31, 2020.

Weighted Average Shares of Common Stock Outstanding

Weighted average shares of common stock outstanding for the year ended December
31, 2022 were 38,997,649, compared to 32,641,288 for the year ended December 31,
2021. The increase was mainly due to shares issued in connection with our
controlled equity offering and registered direct offering.



Weighted average shares of common stock outstanding for the four month period
ended December 31, 2021 were 37,113,137, compared to 24,394,010 for the four
month period ended December 31, 2020. The increase was mainly due to shares
issued in connection with our controlled equity offering and registered direct
offering.

Liquidity and Capital Resources

From our inception through December 31, 2022, we have incurred losses in an
aggregate amount of $163,081,000. During that period and through December 31,
2022, we have financed our operations through several private placements of our
common stock, as well as public offerings of our common stock, raising a total
of $252,946,000, net of transaction costs. During that period, we also received
cash consideration of $28,001,000 from the exercise of warrants and options. We
expect to seek additional financing through similar sources in the future, as
needed. As of December 31, 2022, we had $40,464,000 of available cash,
$111,513,000 of short-term bank deposits, $3,743,000 of marketable securities
and $2,700,000 of long-term investments.



From inception through December 31, 2022, we have not generated significant
revenues from our operations. Management continues to evaluate various financing
alternatives for funding new strategic activities, future research and
development activities and general and administrative expenses through
fundraising in the public or private equity markets. Although there is no
assurance that we will be successful with those initiatives, management believes
that it will be able to secure the necessary financing as a result of future
third party investments. Based on our current cash resources and commitments, we
believe we will be able to maintain our current planned activities and the
corresponding level of expenditures for at least the next 12 months, although no
assurance can be given that we will not need additional funds prior to such
time.



If there are increases in our operating expenses, we may need to seek additional
financing during the next 12 months. Successful completion of our development
programs and our transition to normal operations is dependent upon obtaining
necessary regulatory approvals from the FDA prior to selling our products within
the United States, obtaining foreign regulatory approvals to sell our products
internationally, or entering into licensing agreements with third parties. There
can be no assurance that we will receive regulatory approval of any of our
product candidates, and a substantial amount of time may pass before we achieve
a level of revenues adequate to support our operations, if at all. We also
expect to incur substantial expenditures in connection with the regulatory
approval process for each of our product candidates during their respective
developmental periods. Obtaining marketing approval will be directly dependent
on our ability to implement the necessary regulatory steps required to obtain
marketing approval in the United States and in other countries. We may also need
additional funds to realize the decisions made as part of our strategic review
process. We cannot predict the outcome of these activities.



                                       31

As of December 31, 2022, our total current assets were $157,109,000 and our
total current liabilities were $5,746,000. On December 31, 2022, we had a
working capital surplus of $151,363,000 and an accumulated loss of $163,081,000.
As of December 31, 2021, our total current assets were $147,937,000 and our
total current liabilities were $7,368,000. On December 31, 2021, we had a
working capital surplus of $140,569,000 and an accumulated loss of $126,520,000.
The increase in working capital surplus from December 31, 2021 to December 31,
2022 was mainly due to an increase in cash and cash equivalents.



During the year ended December 31, 2022, cash and cash equivalents decreased to
$40,464,000 from $77,245,000 as of August 31, 2021. The decrease was mainly due
to the reasons described below.



Operating activities used cash of $27,918,000 in the year ended December 31,
2022, compared to $21,181,000 used in the year ended August 31, 2021. Cash used
in operating activities consisted mainly of net loss resulting from research and
development, general and administrative and sales and marketing expenses.



Investing activities provided cash of $30,211,000 in the year ended December 31,
2022, compared to cash used by investing activities of $23,764,000 in the year
ended August 31, 2021. Cash provided in investing activities is mainly due to
proceeds from short-term investments, partially offset by the acquisition of
short-term investments.



Financing activities provided cash of $10,779,000 in the year ended December 31,
2022, compared to $102,892,000 in the year ended August 31, 2021. Cash provided
by financing activities consisted mainly of proceeds from our issuance of common
stock and proceeds from exercise of warrants and options. Our primary financing
activities since the beginning of the year ended December 31, 2022 were as
follows:

? During the year ended December 31, 2022, 4,200 warrants were exercised and

71,607 options were exercised, resulting in the issuance of 38,651 shares of

common stock. Out of these exercised options, 10,750 options were exercised

for cash and 60,857 via a cashless method. The cash consideration received for

the exercise of options and warrants was $62,490. During the four month period

ended December 31, 2021, 73,800 warrants were exercised and 18,166 options

were exercised for cash, resulting in the issuance of 91,966 shares of common

stock. The cash consideration received for the exercise of options and

warrants was $638,267.

? On September 1, 2021, we entered into a controlled equity offering agreement,

or the Cantor Equity Distribution Agreement, with Cantor Fitzgerald & Co., as

agent, pursuant to which we may issue and sell shares of our common stock

having an aggregate offering price of up to $100,000,000, through a sales

agent, subject to certain terms and conditions. Any shares sold will be sold

pursuant to our effective shelf registration statement on Form S-3, including

a prospectus dated July 26, 2021 and prospectus supplement dated September 1,

2021. We paid the sales agent a cash commission of 3.0% of the gross proceeds

of the sale of any shares sold through the sales agent under the Cantor Equity

Sales Agreement. As of December 31, 2022 and through March 6, 2023, 1,778,147

    and 1,971,447 shares, respectively, were issued under the Cantor Equity
    Distribution Agreement for aggregate net proceeds of $23,823,000 and
    $26,253,000, respectively.




During the four month period ended December 31, 2021, cash and cash equivalents
decreased to $27,456,000 from the $77,245,000 reported as of August 31, 2021,
which is due to the reasons described below.



                                       32





Operating activities used cash of $11,122,000 in the four month period ended
December 31, 2021, compared to $8,263,000 used in the four month period ended
December 31, 2020. Cash used in operating activities primarily consisted of
research and development, sales and marketing and general and administrative
expenses, as well as changes in deferred revenue due to the HTIT License
Agreement, partially offset by changes in accounts payable and accrued expenses
and stock-based compensation.



Investing activities used cash of $99,248,000 in the four month period ended
December 31, 2021, compared to cash used in investing activities of $2,405,000
in the four month period ended December 31, 2020. Cash used in investing
activities in the four month period ended December 31, 2021 consisted primarily
of the purchase of short-term deposits. Cash used in investing activities in the
four month period ended December 31, 2020 consisted primarily of the purchase of
short-term deposits, offset by the proceeds from bonds held to maturity.



Financing activities provided cash of $60,572,000 in the four month period ended
December 31, 2021, compared to $13,001,000 provided in the four month period
ended December 31, 2020. Cash provided by financing activities consisted
primarily of proceeds from the issuance of our common stock.



On November 3, 2021, we entered into a securities purchase agreement with
several institutional and accredited investors, or the Purchasers, pursuant to
which we agreed to sell, in a registered direct offering, or the Offering, an
aggregate of 2,000,000 shares of our common stock to the Purchasers for an
offering price of $25.00 per share. The closing of the sale of the shares
occurred on November 5, 2021. The net proceeds to us from the Offering, after
deducting the placement agent's fees and expenses and the Company's Offering
expenses, were approximately $46,375,000.



Trend Information



Following the results of the Phase 3 trials for our oral insulin capsule
candidate, ORMD-0801, we have initiated a comprehensive analysis of the data to
understand if there is a path forward for our oral insulin candidate.
Concurrently, we are examining our existing pipeline and have commenced an
evaluation process of potential strategic opportunities, with the goal of
enhancing value for our stockholders. At this time, we cannot foresee how these
strategic decisions will impact our financial results and operations in 2023.



Planned Expenditures



We invest heavily in research and development, and we expect that in the
upcoming years our research and development expenses will continue to be our
major operating expense. As of December 31, 2022, we had expected obligations
with respect to an aggregate of approximately $21 million of clinical research
obligations over the next three years.

Following the results of the Phase 3 trials for our oral insulin capsule
candidate, ORMD-0801 and the current strategic review initiated by the Company,
our obligations may change significantly.

Critical Accounting Policies



Our significant accounting policies are more fully described in the notes to our
accompanying consolidated financial statements. We believe that the accounting
policies below are critical for one to fully understand and evaluate our
financial condition and results of operations.



The discussion and analysis of our financial condition and results of operations
is based on our consolidated financial statements, which we prepared in
accordance with U.S. generally accepted accounting principles, or GAAP. The
preparation of our consolidated financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements, as well as the reported revenues and
expenses during the reporting periods. On an ongoing basis, we evaluate such
estimates and judgments. We base our estimates on historical experience and on
various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.



                                       33





Valuation of RSUs, options and warrants: We grant options to purchase shares of
our common stock to employees and consultants and have and may in the future
issue warrants in connection with some of our financings and to certain other
consultants.

We account for share-based payments to employees, directors and consultants in
accordance with the guidance that requires awards classified as equity awards to
be accounted for using the grant-date fair value method. The fair value of
share-based payment transactions is based on the Black Scholes option-pricing
model or Monte Carlo model when appropriate and is recognized as an expense

over
the vesting period.



We elected to recognize compensation cost for awards to employees, directors and
consultants that have a graded vesting schedule using the accelerated method
based on the multiple-option award approach.

Revenue recognition: Revenue is recognized when delivery has occurred, evidence
of an arrangement exists, title and risks and rewards for the products are
transferred to the customer and collection is reasonably assured.

Under Accounting Standards Codification, or ASC, 605 (which was the
authoritative revenue recognition guidance applied for all periods prior to
September 1, 2018) given our continuing involvement through the expected product
submission by HTIT in June 2023, amounts received relating to the HTIT License
Agreement were recognized over the period from which we were entitled to the
respective payment, and the expected product submission date using a time-based
model approach over the periods that the fees were earned.



However, under ASC 606, we are required to recognize the total transaction price
(which includes consideration related to milestones once the criteria for
recognition have been satisfied) using the input method over the period the
performance obligation is fulfilled. Accordingly, once the consideration
associated with a milestone is included in the transaction price, incremental
revenue is recognized immediately based on the period of time that has elapsed
towards complete satisfaction of the performance obligation.



Since the customer benefits from the services as the entity performs, revenue is
recognized over time through the expected product submission date by HTIT in
June 2023, using the input method. The Company used the input method to measure
the process for the purpose of recognizing revenue, which approximates the
straight line attribution. The Company used significant judgment when it
determined the product submission date.



Under ASC 606, the consideration that the Company would be entitled to upon the
achievement of contractual milestones, which are contingent upon the occurrence
of future events, are a form of variable consideration. When assessing the
portion, if any, of such milestones-related consideration to be included in the
transaction price, the Company first assesses the most likely outcome for each
milestone and excludes the consideration related to milestones of which the
occurrence is not considered the most likely outcome.



The Company then evaluates if any of the variable consideration determined in
the first step is constrained by including in the transaction price variable
consideration to the extent that it is probable that a significant reversal in
the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. The Company
used significant judgment when it determined the first step of variable
consideration.



 On November 13, 2022, we entered into a distribution license agreement with
Medicox, or the Medicox License Agreement. The Medicox License Agreement grants
Medicox an exclusive license to apply for regulatory approval and distribute
ORMD-0801 in the Republic of Korea.



                                       34

Under ASC 606, we identified Medicox as a customer and the Medicox License
Agreement as a contract with a customer.

We identified a performance obligation in the Medicox License Agreement to
stand-ready and provide Medicox with support in its commercialization efforts in
the Republic of Korea. This performance obligation includes a non-distinct
distribution license for ORMD-0801, which we view a predominant item in the
combined performance obligation. We concluded that the license is not distinct,
as no party other than us is capable of providing related services to Medicox,
and both the license and related services are necessary for the customer to
obtain a regulatory approval in the Republic of Korea. In addition, the
agreement covers the terms of future manufacturing services, that are contingent
on the completion and success of the commercialization efforts.

The Medicox License Agreement contains a fixed consideration of $2 million,
which was received by Oramed as of December 31, 2022 and is presented under
long-term deferred revenues. It also contains variable consideration of
contractual milestone payments and sales-based royalties.

Our obligation to stand-ready and support Medicox will be recognized on a
straight-line basis over the period we expect to provide support to Medicox. As
of December 31, 2022, this support has not commenced, and no revenue was
recognized from the Medicox License Agreement.

If Medicox proceeds with the regulatory approval process in the Republic of
Korea, we expect most of the revenue to be recognized in 2024, going forward. We
note that our Phase 3 trial did not meet its primary and secondary endpoints. If
Medicox chooses to terminate the agreement as a result of the outcome of the
Phase 3 trials, we will accelerate revenue recognition and recognize it in 2023.

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